India’s financial sector is undergoing a quiet revolution driven by artificial intelligence. From loan approvals in minutes to fraud detection in milliseconds, AI is reshaping how Indians interact with money. These changes are not just for tech-savvy urban elites—they’re reaching street vendors, farmers, and small businesses.
This has also brought about a change in financial models. Below are five critical trends defining this transformation and their implications for India’s diverse economy.
Key trends in AI financial models
1. AI credit scores for people without bank histories
Millions of Indians—like street vendors or gig workers—can’t get loans because they lack formal credit records. AI now looks at other clues to judge trustworthiness:
- How often do they recharge their phones
- Regular UPI payments for bills or supplies
- Activity on apps like WhatsApp Business for small sellers
For instance, a small business owner (like a tea seller) can get a loan from a financial institution by showing six months of UPI receipts from daily sales. This gives them access to a line of credit, something which wouldn't have been possible earlier without a credit score.
Why it works: Startups use these methods to help non-banking financial companies lend to small businesses safely.
2. AI fraud guards for digital payments
As UPI hits record use, scams rise, too. AI now spots fraud in real-time by:
- Checking if a payment screenshot is fake.
- Flagging sudden location changes (like a Delhi user paying from Chennai).
- Blocking shady links sent via SMS or email.
By tracking unusual patterns like repeated small payments to new accounts, AI can help digital apps detect fraudulent activities and undertake precautionary measures.
3. Customised money products
AI tailors financial offers to personal habits
- Frequent food delivery app users get food-delivery insurance discounts
- Wedding loans pop up after someone searches matrimony sites
- Young investors see crypto fund options, retirees get safer bonds
How it helps: Once you book flight tickets, you might receive travel loan offers, allowing you to finance your trip without dipping into your funds.
4. Robo-advisors for small investors
Certain apps use AI to help regular folks invest smarter:
- Suggest mixing stocks and gold based on risk comfort
- Alert to sell before market dips using news trends
- Auto-invest in tax-saving funds before deadlines
This allows investors to choose from several investment options, such as sector-specific stocks and mutual funds like debt funds. They can diversify their investments to ensure they receive certain returns depending on their risk appetite.
5. AI handles banking rules
Banks face endless RBI rule changes. AI now:
- Writes audit reports in hours, not weeks
- Flags suspicious accounts for money laundering checks
- Translates complex regulations into simple to-do lists
Result: Many banks are cutting compliance costs by a significant amount, letting them lower loan fees for customers.
NBFCs: Reaching the ignored
Non-banking financial companies use AI to serve groups banks ignore:
- Farmers: Loans based on crop health seen via satellite photos
- Street vendors: Credit limits set by daily sales tracked via apps
- Home businesses: Cash flow checks using WhatsApp chat histories
In various parts of the country, small businesses and individuals like farmers can avail of loans, allowing them to invest in their businesses. This also translates to timely repayments, allowing financial institutions to reap the benefits of catering to underserved communities.
Online marketplaces join the game
Now, digital platforms are integrating artificial intelligence, resulting in enhanced customer experiences. Here are a few benefits of AI integration:
- Quick loans: Sellers get cash advances based on customer reviews
- Smart pricing: AI suggests discounts to clear stock fast
- Pay Later: Buyers approved instantly using past shopping habits
Sellers can also benefit from the AI tips, increasing their profits and repaying the loans effortlessly.
Challenges to watch
- Bias risks: AI trained on city data may ignore village needs
- Too much automation: Losing human touch in debt recovery
- Tech gaps: Many still struggle with app-only services
What’s next
For AI finance to work for all India, we need:
- Tools that understand regional languages and rural contexts
- Clear rules to stop AI bias against women or low-income users
- Training for small businesses to use these technologies
As RBI rolls out AI guidelines, the focus stays on making finance fair and inclusive. With NBFCs reaching grassroots and online marketplace innovating, India’s money future looks bright while also aiding small businesses and individuals to realise their dream of financial freedom.